Answered: Product A Product B Units produced 6…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 3CE: Lansing. Inc., provided the following data for its two producing departments: Machine hours are used...

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Two products, A and B, are made using similar equipment and methods. The data for last period
are:
Product A Product B
Units produced 6 000 8 000
Labour hours per unit 1 2
Machine hours per unit 4 2
Set-ups in period 15 45
Orders handled in the period 12 60
Overheads for Period $
Relating to production set-up 179 000
Relating to order handling 30 000
Relating to machine activity 55 000
264 000
A. Calculate the overheads to be absorbed per unit of each product, based on:
i. absorption costing using labour hour absorption rate.
ii. an ABC approach using suitable cost drivers.
B. Give TWO (2) advantages and TWO (2) disadvantages of the ABC System.

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